A.M. Best has assigned a debt rating of “bbb” to the recently
issued CAD 350 million 3.90% non-cumulative rate reset Class 1 shares
Series 17 of Manulife Financial Corporation (MFC) (Toronto,
Ontario). The outlook assigned to the rating is stable. This offering is
for five-year rate reset preferred shares issued at CAD 25 per share.
The proceeds from the new preferred shares offering will be utilized for
general corporate purposes, which include funding the redemption of the
existing CAD 350 million Class 1 Series 1 Preferred Shares on Sept. 19,
2014. The newly issued preferred shares are anticipated to qualify as
Tier 1 capital for MFC. MFC’s financial leverage has been decreasing due
to its capital growth and remains within the range that supports its
current ratings. Since this issuance is to refinance a redemption, it is
expected to be leverage neutral.
A.M. Best has also assigned indicative ratings of "a-" for senior
unsecured debt, "bbb+" for subordinated debt and "bbb" for preferred
stock, which may be issued under the recently filed and approved base
shelf prospectus of MFC. The outlook assigned to all these ratings is
stable.
The ratings on the securities, which may be issued under the base shelf
prospectus, are consistent with the current ratings of MFC's outstanding
securities. The new base shelf prospectus replaces MFC's previous base
shelf prospectus. Consequently, the ratings for the previous base shelf
prospectus have been withdrawn. All remaining debt ratings and ratings
of MFC and its subsidiaries remain unchanged.
MFC reported net income of CAD 943 million in its second quarter of 2014
International Financial Reporting Standards’ financial results due to
solid core earnings and growth in the company’s asset management
business in Asia, Canada and the United States, plus strong investment
experience. Mutual fund assets have continued to grow as MFC focuses its
growth on high return and lower risk businesses. Despite the use of
hedging to mitigate earnings volatility, A.M. Best believes the
company’s large book of interest and equity market sensitive in-force
business will continue to remain a challenge.
The methodology used in determining these ratings is Best’s Credit
Rating Methodology, which provides a comprehensive explanation of A.M.
Best’s rating process and contains the different rating criteria
employed in the rating process. Best’s Credit Rating Methodology can be
found at www.ambest.com/ratings/methodology.
A.M. Best Company is the world’s oldest and most authoritative
insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS
RESERVED.
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